Dana Gas: The Sukuk Dispute

Abstract

In its announcement dated 13 June 2017, Dana Gas called for a restructuring of the Sukuk maturing in October worth US$700 million. This demand was based upon the claim that the evolution of Islamic finance and jurisprudence since the original structuring of the mudarabah sukuk had rendered it, in its present form, Shariah non-compliant and hence unlawful and unenforceable under the UAE law. This case analyzes the impact of the events leading up to this decision on the work of financial analysts following such firms and products. In response to the principles laid down by the management for a restructuring deal, the ad hoc committee representing sukuk holders refused to exchange the existing instruments with the new ones. Dana Gas secured a series of injunctions around the globe preventing enforcement by creditors after it ended up in a legal battle with its sukuk holders in courts both in the UK and the UAE. In November 2017, the English court ruled in favour of Dana’s creditors, dismissing the grounds of the company’s claims as unfounded under contractual obligations. Despite this, the legal battle was far from over as a verdict from the UAE court on the validity of the sukuk was still awaited. Although this was not the first sukuk dispute faced by the US$2 trillion Islamic finance industry, it was certainly a distressing and potentially destabilizing development for the international sukuk market.